From: desiree.day@hines.com [mailto:desiree.day@hines.com] 

Sent: Thursday, August 13, 2015 9:19 PM

To: EBSA, E-ORI - EBSA

Subject: Definition of the Term “Fiduciary” (RIN 1210-AB32); Best Interest Contract Exemption (ZRIN 

1210-ZA25)

I am a Direct Investments industry professional who is writing to you today with respect to the 

Department’s proposed rule defining who is a “fiduciary” by reason of providing investment 

advice for a fee or other compensation (the “Conflict of Interest Rule”) and the related Best 

Interest Contract Exemption (the “BIC Exemption”). I appreciate the opportunity to comment on 

this important regulatory action.

My primary concern relates to the Department’s definition of “Assets” in the BIC Exemption. 

The Department has requested comment on the proposed definition of Assets and has 

specifically asked that commenters who believe that additional investments should be included in 

the scope of the exemption provide the Department with information supporting their inclusion. 

Direct Investment products, such as non-listed Real Estate Investment Trusts (“REITs”), 

Business Development Companies (“BDCs”), energy and equipment leasing programs, and 

private equity offerings, are important investment vehicles for American investors trying to save 

for their retirement. None of these products have been addressed by the Department in the Rule 

or included in the BIC; this will have the impact of effectively making such investments 

unavailable to qualified IRA investors. I believe that direct investment products should be 

included as “Assets” within the “BIC” exemption either by the removal by the Department of a 

“legal list” of “Assets” or by the inclusion of direct investment products on the “legal list”.

Direct investment products are distributed by highly regulated broker-dealers, who must follow 

rules from the SEC, FINRA and state regulators. Furthermore, most direct investment products 

are subject to higher disclosure and investor qualification requirements than many other financial 

products. In addition, FINRA Rule 2310 imposes additional transparency requirements on 

broker-dealer distributed direct investment products.

Most importantly though, direct investments are not only a common investment for retail 

investors generally, but are also a common investment for IRAs. As of 12/31/14,investors held 

more than $84 billion of non-listed REIT and BDC shares in their accounts, according to DST 

Systems. In 2014 alone more than $16 billion was invested in non-listed REITs and over $5 

billion invested in BDCs. For the year ended 12/31/14, approximately 41% of the non-listed 

REIT investments were held by IRAs and approximately 48% of the BDC investments were held 

by IRAs. There are almost 3 million retail accounts invested in BDCs and non-listed REITs 

alone. Of these retail accounts, 43% or over 1.2 million are IRAs. Non-listed REITs and BDCs 

serve an important purpose in portfolios because non-listed BDCs and REITs generally do not 

correlate with S&P 500 returns, thus providing diversification. Finally, non-listed REITs and 

BDCs have favorable standard deviation rates, demonstrating that there is less volatility in their 

share price and performance over time, another positive attribute. There is no principled reason 

why an IRA investor may not choose to invest in non-listed REITs or BDCs, not to mention have 

the option to invest in other product not currently considered “Assets” such as private equity 

funds and oil and gas programs.
For all the reasons I mention above, I urge the Department to revise the BIC Exemption in order 

to include Direct Investment products within its scope , either by doing away with a list of 

specific Assets or by adding Direct Investment products to that list. I appreciate your time and 

attention in ensuring that retirement investors are provided with the broadest array of investment 

options, while taking all possible measures to avoid conflicted advice.

Sincerely, Desiree Day Hines Securities 8623 Village Terrace Houston, TX 77040